Ardea (ASX:ARL) reaches Japanese consortium agreement for Kalgoorlie nickel

Ardea Resources and the Japanese consortium of Sumitomo Metal Mining and Mitsubishi have reached an agreement on the scope and budget of a definitive feasibility study over its Kalgoorlie Nickel Project and Goongarrie Hub in Western Australia’s Goldfields.

A 6.1 million tonne nickel and 386 kilotonne cobalt resource estimate places the project awarded Major Project Status by the Australian Government among the top 10 global nickel resources.

Nickel prices are depressed in the wake of a glut of cheap Indonesian supply, but Australia’s federal government is supporting the nation’s industry, and has added nickel to a list of commodities eligible for support from a $6 billion stimulus fund.

Ardea Resources Managing Director and CEO Andrew Penkethman said it was pleasing nickel had been added to the Australian Critical Minerals list and the sector was receiving Western Australian state government and federal support.

“This initiative reiterates that Australia and key ally nations remain focused on supply chain diversity and security, with planning for the KNP Goongarrie Hub taking into account the high ESG standards expected by modern democratic society,” Mr Penkethman said.

“With the long-term fundamentals for nickel remaining strong, Ardea and the consortium continue their proactive engagement and collaboration which has helped facilitate significant progress in finalising the KNP Goongarrie Hub DFS scope of work and budget.”

Mr Penkethman added commercial discussions were continuing as a priority.

“Key considerations being covered include DFS funding, through to securing project development capital to enable project construction and achieve steady state nickel cobalt production, from within the best resources operating jurisdiction in the world,” he said.

Ardea and the consortium will now continue discussions, aimed at finishing off binding final agreements to be executed by the end of March 2024.

After that, future work will then be directed towards completing the project’s definitive feasibility study, making a final investment decision and securing the funding for a shared vision to become a globally significant producer.

Green nickel

A rush for Indonesian nickel has come with a caveat that the rapidly emerging industry could have devastating effects on the environment.

There is currently no track record there for sustainable mining, and both governmental figures and private players from Australia have called for a green premium to be paid.

Federal Resources Minister Madeleine King has provided her support for a price premium on Australian nickel but said that manufacturers may need better incentives to pay for ethically produced products.

“We are yet to see any meaningful environmental, social and governance premium for green or ethically sourced nickel or nickel sulphides. These are increasingly important issues for importer nations of nickel such as members of the European Union,” Ms King said of ESG-related pricing.

It was a sentiment supported by Fortescue (ASX:FMG) executive chairman Dr Andrew Forrest, with the outspoken nickel magnate calling for the London Metals Exchange to separate nickel contracts into the clean and the dirty.

But nickel prices may have hit their floor regardless of a green premium, with leading investment bank Morgan Stanley at least seeing that most of the downside is now in the rear-view mirror.

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